Daily Brief: iPhones Are Big In China, Sure, But They Might Still Be Living On Borrowed Time

Daily Brief: iPhones Are Big In China, Sure, But They Might Still Be Living On Borrowed Time

almost 3 years ago3 mins

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Ugh, Apple’s going to be talking about how it “found itself” in China for years: the tech giant reported better-than-expected quarterly earnings late on Wednesday, and its stock initially jumped 4%.

What does this mean?

There’s been huge demand for iPhones all over the world lately, with revenue coming in 16% higher than analysts predicted. Apple’s 5G-enabled models were particularly popular in China, whose transition to 5G networks – and, presumably, its population’s transformation into lizard people – is fully underway. In fact, that spike in demand might’ve been why Apple’s overall revenue beat expectations by 16%. And while the company opted not to offer an earnings forecast for this quarter, it did raise its dividend and promise more share price-boosting buybacks to come.

Apple revenue

Why should I care?

Zooming in: The future is subscriptions.

A major focus for Apple’s investors is its subscription services: think Apple TV, Apple Music, and the App Store. The company’s increasingly been pivoting toward the segment, which comes with steadier sales and much higher profit margins than hardware. So it’s no wonder investors were upbeat about Apple’s results: its services revenue grew by a better-than-expected 27% compared to the same time last year, and the company’s profit was almost 40% higher than investors had forecast.

Revenue by category
Source: MacRumors

The bigger picture: The present is still iPhones.

In the grand scheme of things, demand for newer, more expensive iPhones is actually sinking. And since iPhone sales still make up half of Apple’s total revenue, the company’s trying to offset that drop by selling more of its cheaper models. That strategy might’ve got a shot in the arm on Wednesday: the US president introduced a new plan that calls for $800 million in tax cuts and credits, which should give lower-income families more money to spend on life’s little luxuries.

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Facebook Posted Better-Than-Expected Results

Facebook image

Facebook and investors can overcome anything, together: the social media empire announced better-than-expected quarterly earnings late on Wednesday, and its stock initially climbed 6%.

What does this mean?

There was so much time and so little to do last quarter, and Facebook was more than happy to fill the void: the company saw the number of monthly active users across its social media platforms rose by 10% compared to the year before, bringing the total to 2.9 billion. And given that it makes virtually all its money by selling users’ attention to advertisers, that boost pushed its quarterly earnings above forecasts. It’ll also give the company newfound hope that it can finally move on from last year’s advertising boycott, when a number of high-profile firms – including Coca-Cola and Procter & Gamble – cut their spending on the platform in protest of some of its more… problematic policies.

Facebook monthly active users

Why should I care?

For markets: Digital ads are a goldmine.

The latest results from Alphabet, Snapchat, and now Facebook prove that the digital advertising market is bigger than ever these days. The pandemic, after all, has driven an unstoppable shift toward online shopping and the ads it relies on. That suits Facebook fine: its platform accounts for a quarter of all digital ad spending in the States, and its ecommerce tools – those that allow businesses to set up online stores directly on Facebook and Instagram – aren’t doing too shabbily either.

Facebook revenue per user

The bigger picture: There’s no such thing as a sure thing.

Not everything’s quite so simple for the social media giant, mind you. For one thing, new privacy settings from Apple are about to make it harder for Facebook to target ads to iPhone and iPad users, potentially denting one of its most lucrative sources of ad revenue. Oh, and then there’s the little matter of the US government’s ever-growing enthusiasm for breaking up Big Tech altogether…

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